Government debt continues to mushroom, finance minster reports

With revolving charts and statistics behind him, Edgar Ayales Wednesday said that the budget deficit now sits at 5.5 percent of the country’s gross domestic product. On his graph, Ayales then showed what the difference would look like in five years if the government does not follow the finance consolidation plan.

“It couldn’t be anymore clear that there is a fiscal problem,” Ayales said. He is the minister of Hacienda, the central government’s top financial expert.

He alluded to the government’s continued spending trends as worrisome. From January to February, the gap between incomes and expenses increased another 1.2 percent of the gross domestic product, he said.

The powerpoint presentation showed that the nation is on track to reach a debt of more than 7 percent soon. Ayales said he thinks government officials have been taking the deficit numbers too lightly.

“To me, it’s dangerous to say that six percent is manageable,” he said.

In January, Ayales said the deficit could effectively be eliminated in five years. Wednesday he predicted the government’s best hope by 2019 would be a return to 3 percent, which he said could be a more manageable task.

Luís Guillermo Solís is expected to take over at the Casa l Presidencia May 8. He will inherit the mounting debt from his predecessor Laura Chinchilla. The minister refused to mention specific names since the election is still technically a contest, but he did say whoever takes over should follow a few pieces of advice laid out by the Ministerio de Hacienda.

According to his plan, the next government will be transparent and accountable, which are two values that the campaign of Solís pitched frequently. The plan further suggests more cautious spending, and Ayales criticized the many expensive projects made in Chinchilla’s tenure. He also stressed better control over the level of spending within the public sector.

He repeated the need for a joint agreement between the government, the courts, and the legislature in order to guarantee financial responsibility. His consolidation plan also calls for a fiscally minded administration that will work to gradually balance the budget.

The government needs to begin by eliminating the primary deficit (which excludes the cost of interest), he said.

A glimpse of good news came as Ayales said the unemployment rate is lower than in years past as it has dropped back to 8.3 percent. The finance minister credited this improvement to more job creation from the commercial and service sectors.

The minister was expected to continue in his post if Johnny Araya Monge of the Partido Liberacón Nacional won the presidency. That does not seem likely because Araya has stopped campaigning. Solís of Acción Ciudadana has not announced an economics team.

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